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Broker: Expect tighter underwriting in 2014

One leading industry player foresees tightened mortgage insurance underwriting regulations in 2014, which may affect the broker industry more than its banker rivals.

“The regulations are just going to keep getting worse; in 2014 OSFI is commencing B21, which is their work with the three mortgage insurers (and) the three mortgage insurers are the backbone of all of the monolines,” Ron Butler of Verico Butler Mortgage told MortgageBrokerNews.ca. “(It will have) less effect on the banks for conventional business but (will have a) big effect on the monolines for conventional business.”

The B21 guidelines are expected to be opened to public comment in March of this year. If they pass, the guidelines will require the three mortgage insurers – Genworth, Canada Guaranty and CMHC -- to more stringently police the mortgage default loans they back.

Butler’s pessimism echoes statements previously made that bank employees will have an easier time than brokers dealing with underwriting guidelines in 2014. And the B21 guidelines aren’t the only regulatory changes industry players may be forced to deal with this year.

“We’re going to feel the impact of B21 unless in the first quarter the Minister of Finance (Jim Flaherty) sees that the pricing increase in property values in Canada is really starting to stop (or) slow (and) it’s no longer going to be expanding in 2014,” Butler said. “If he thinks that at the end of March that the price of houses is going to keep on going in Toronto, Vancouver and Calgary, I wouldn’t be surprised if conventional mortgages went to 25 year amortization.

“That creates more intense rule-oriented difficulties. That’s going to get worse and worse, it’s not going to get any better this year,” he added. “Whatever pain we felt on the underwriting side last year … the painful changes are going to be there, there’s going to be no relief, and there are going to be more changes.”

This is part three of a three-part series. To read part one, click here. Part two can be found here.